Saturn, Inc. signed a oneminusyear $ 36,000 note payable at 8% interest on March 1, 2017. How much interest expense must be accrued on May 31, 2017? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number

May 31 2017   Interest expense    720 Dr

                          Interest Payable      720 Cr

Interest expense of 720 is accrued on May 31 2017.

Explanation:

The notes provides 8% interest rate which is the annual interest rate. The total interest on the one year note is 36000 * 0.08 = 2880 which is payable at the end of the term when the note payable is due. However, if the company prepares adjusting entry on a monthly basis or at the end of the period, it will record the interest expense that relates to that period and accrue it.

Till may 31 2017, 3 months have passes and the interest for 3 months is accrued which comes out to be 2880 * 3/12 = $720

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